Car Loan - Compare & Apply Car Loan Online Car Loan Interest Rates

It is vital that you maintain a good credit score when you apply for a car loan. Apart from the loan getting approved quicker, lenders will offer low interest rates if your credit score is good. No security or collateral is required when availing a car loan. The car acts as the security.

Amount:
Term:

Mortage Calculator

Car Loan Details
Interest Rate (Monthly reducing balance)
7.70% onwards
Processing Fees
Starts from 0.230% of the loan amount
Loan Tenure

1 year to 8 years

Pre-closure Charges

Varies with bank

Guarantor Requirement

Varies with bank

Note:The interest rates will differ from one bank to another. This makes it critical to compare the interest rates before choosing a loan to apply for.

Eligibility Criteria and Documents Required

 The car loan eligibility criteria can be different for different banks. The common criteria are as follows:

  • Age between 18 years and 75 years
  • Minimum net monthly income of Rs. 20,000
  • At least 1 year of employment with the current employer
  • Must be salaried or self-employed, working for a government establishment or a private company

 To prove your eligibility, you’ll need to provide certain documents. Though this too is specific to different lenders, the common   documents will be:

Eligibility
Identity proof (any of the following)
  • Aadhaar
  • Passport
  • Driving license
  • Voters ID card
  • PAN card
Address proof (any of the following)
  • Aadhaar
  • Passport
  • Driving license
  • Ration card
  • Utility bills
Proof of income
  • Form 16
  • Salary slips if you are salaried
  • Latest Income Tax Returns
  • Bank statements going back 6 months

Note: Make sure you check exactly what documents the lender wants. The documents required can change depending on your situation too. The documents required to take a used car loan are the same as above.

Car Loan - Checklist to Follow While Applying for it

Steps Requirement Inference
Apply for a car loan

Compare all offers available

To find the loan that offers you the highest loan amount and the most affordable interest rate
Submit Income Proof
Bank Statement (last 6 months) Pay-Slips (last 3 months) IT- Returns (last 2 years)

Lender wants to establish your ability to repay the borrowed amount

Submit Proof of Address and Identity

PAN Card, Voter’s ID, Aadhaar Card, Passport, etc.

Lender wants to establish your nationality, identity, and permanent address

Credit History

PAN Card

Lender wants to check your past credit records and establish if you can be trusted to make regular repayments

Information About Vehicle

Sales Receipts from the showroom from where the vehicle was purchased

Lender must confirm that the deal was affected as intended

Proof of Insurance and Driving License

Copies of the vehicle’s Motor Insurance and your Driving License

Lender must establish that all laws and protocols are followed with regards to the purchased vehicle.

Personal Loans vs. Car Loans

When it comes to a big purchase – for example a car, we often resort to loans for the financing of the same. Both personal loans and car loans are two of the biggest and most common financing options that are availed by consumers.

A personal loan can be used for any purpose. There are no bindings in the case of personal loans. However, car loans are particularly available for car purchases. To have a better understanding, you can check the pros and cons of both the products.

Pros and Cons of Personal Loans

Pros:

  • There are no restrictions in regard to the usage of the funds. The loan amount can be used for any purpose.
  • It offers the flexibility in the payment structure.

Cons:

  • The interest rate for a personal loan is likely to be higher as it is an unsecured loan product.
  • Owing to its unsecured nature, personal loans also come with more stringent lending criteria.
  • Credit score plays a major role in ascertaining your eligibility for the loan.

Pros and Cons of Car Loans

Pros:

  • Car loans usually have a lower rate of interest.
  • It is easier to avail a car loan.
  • Since it is a secured loan, an individual with a mediocre credit score is also likely to be eligible for the loan.
  • The vehicle itself acts as a security against the loan.

Cons:

  • You will be required to provide a down-payment.
  • The car will be hypothecated to the bank and you will receive the complete ownership only after the payment of the final instalment.

However, it is advised that you compare different loan products and then choose the one that suits your requirements. While a car loan is easier to get, at times a personal loan might be of better effect.

How to Calculate Car Loan EMI?

The EMI (Equated Monthly Installments) that you will pay will depend on of a few key factors. These are:

  • The size of the loan
  • The interest rate that is applicable to the loan
  • The tenure of the loan
  • The processing fees

The higher the loan amount, the higher your EMI will be. Similarly, the shorter the loan tenure the higher the EMI. To find the best compromise between an affordable EMI and duration you should check out our car loan EMI calculator.

Choosing the Right Car Loan

The following table explains the do’s and don’ts when choosing the right car loan:

Do's Don't
Compare - BankBazaar.com can help you compare the various car loan options available to you.
Eligibility - Do not apply for a loan amount that exceeds your eligibility, as this will result in the rejection of your loan application.
What’s the Interest? – Chose a loan that offers you the best interest rate along with the loan amount you need.

Multiple Applications - Do not apply with multiple banks as this will have a negative impact on your credit score.

Keep it Simple – Chose the car before applying for the loan and make sure the cost of the car fits your budget.

If your application is rejected, don’t continue to keep apply at different banks. Chances of rejection will rise.

Hidden Fees and Charges - Sometimes what appears as obvious will have a hidden component. Be aware of the hidden fees and charges concerning the car loan.

Relying on the Dealership for loans - The loan that the dealer offers may not have the best interest rate. So, check the other options.

Special offers – There could be special offers available when you are applying for your loan. Make sure you take advantage of them

Don’t pick a car with a high service cost because you already have the EMI and the insurance premiums to pay.

Insurance – Check the insurance premium for the car as this is a recurring cost.
Do not request for a change in tenure unless you have considered all the aspects

In case of bad credit, is a long-term car loan a better option?

According to financial experts, it is always recommended to opt for a short-term loan in case you have bad credit. Even though the monthly payments will reduce, the interest rates will be much higher for long-term loans. The interest rates are usually high in case you have bad credit, and long-term loans will further increase it. Negative equity is another risk that comes with long-term loans as well. Negative equity comes into effect when the value of the car is lower than the loan amount. The chances of the car needing repairs during the loan duration also increase. Over a duration of time, wear and tear occur and there are chances of major repairs which could increase the costs as well.

Features and Benefits of Car Loan

When it comes to car loans in India, in general, the following features and benefits are offered. Note that, the following is a generalized look at the advantages offered by car loans. Individually, car loan lenders may have highly customized and specialized offerings for their customer base.

  • It helps you purchase a car even if you don’t have all the money for it right now.
  • Most car loans will finance the on-road price of the car.
  • Some car loans will even finance 100% of the on-road price. This means no down payments.
  • With some banks offering financing in the crores, you are not limited in your choice of cars
  • Most car loan offerings in India are secured loans. This implies that the car serves as the security/collateral for the loan.
  • Procuring a car loan is usually simple when compared to other loan products. Individuals with slightly unsavoury credit scores can also hope to procure one. However, this option differs from bank to bank.
  • Car loans in India often offer fixed interest rate options. This means, you are always assured of a fixed amount that needs to be repaid monthly.
  • Many lenders will offer interest rates based on your credit score so a high score to get you a cheaper loan.
  • Car loans are not meant for just new cars. A used car loan can help you buy a pre-owned car.

Car Loan Approval - Steps to Get the Loan Approved Faster

When you want to receive funds to purchase the new or used car that you have been eyeing for a while, it is better that you opt for a pre-approved loan. To avail such a loan, you can follow a few steps to quickly receive the required funds.

  • Check Your Credit Report You can check your credit report to verify your standing in terms of credit score. A score of 750 or more can get you a lower interest rate. However, the interest rate for a score of 650 to 750 will be slightly higher. If you have defaults in your report, or have a very low score, your application may be rejected.
  • Pay Your Bills on Time In order to avail a loan to purchase your dream car, you must have a minimum monthly pre-tax income and a manageable debt-to-income ratio (DTI). While it is usually not possible to change one’s income, you can improve your DTI by clearing off all your pending credit card debts.

To create a better credit profile, you should always pay your bills on time. If that is not possible then you can make timely payment of your bills at least 6 months prior to the loan application. If you pay your bills on time, it assures the lender that you will also repay the Equated Monthly Installments (EMIs) on time. This, in turn, will help you secure a loan easily.

  • Look for Car Loan Options There are multiple options available in the market through which you can get a loan to purchase your new or used car. You should check the car loan interest rates of different banks and car financing firms in order to find the one that fits your needs.
  • Borrow as Less as Possible By paying a larger amount upfront as down payment, you can reduce the sum that you will have to borrow in order to match the price tag of the car you have chosen. If you borrow a lesser amount, you will be in a better position to repay your loan quickly since a smaller loan amount means smaller EMIs or a shorter loan tenure. Additionally, the amount that you will have to pay to your bank or car financing organisation as interest will also reduce.
  • Be Sure to Choose a Plan That Fits Your Budget The repayment capability of an applicant greatly impacts the approval of a loan that he or she has applied for. As you decide to get a loan to purchase the car that you have always wanted, you should make sure that you choose a scheme that you can afford. If you are already paying EMIs for other loans that you have availed, you should ensure that you can also pay the EMI of the car loan that you choose.
  • Pay Attention to the Terms of the Loan A car loan that has low monthly EMIs but consists of a longer tenure might not be viable for you. Before you finalise your financing scheme, you should always try to opt for a plan that carries the lowest interest rate and the shortest loan tenure as possible. Avoid being tricked into an expensive payment situation by ensuring that the loan terms are conclusive.
  • Get a Car Insurance with Complete Coverage While offering a loan, the main concern of banks and NBFCs is not to incur any losses. Therefore, having a full-cover insurance is a requirement for many organisations before sanctioning a car loan as it helps recover the balance debt in case there is an accident wherein the borrower is at fault.

Foreclosing a Car Loan

When you take a car loan, you can repay it in equated monthly instalments (EMIs) till the end of the repayment tenure. However, if you decide to pay off the outstanding loan amount before your tenure ends, you will be foreclosing or prepaying your loan. The foreclosure/prepayment facility is offered by most lenders for a penalty fee though some lenders may allow you to foreclose/prepay your car loan without charging you any penalty.

You can foreclose your car loan if your income has increased and you wish to clear off your liability. It also takes away your burden of having to make monthly EMI payments. Foreclosing a car loan will release the hypothecation on the car and give you full ownership.

As stated above, some lenders may charge you a penalty on loan foreclosure. Hence, before you decide to foreclose a loan, it is a good idea to go through the clauses associated with it carefully.

Top-Up Loan on Your Car Loan

If, after taking a car loan, you need quick or additional funds for purposes such as a wedding, home renovation, medical emergency, etc., you can get a top-up loan on your existing car loan. You can avail up to 150% of the car’s value as a top-up loan. Most lenders that offer a top-up on their car loans will require you to maintain a clear payment record for at least 9 months. The process to avail a top-up loan on your existing car loan is quick and requires minimal paperwork.

Some of the banks that offer top-up on their car loans are HDFC Bank, Axis Bank, ICICI Bank, and Kotak Mahindra Bank.

Car Refinancing

When you take a new loan to pay off the outstanding balance on your existing car loan, it is known as car refinancing. You can choose to refinance your car loan if you wish to replace your current loan with better features such as low interest rates, extended repayment tenures, etc., or simply to change the terms of your current loan. The most common reason why people refinance their car loans is to save money. When refinancing a car loan, you can avail a new loan that offers lower interest rates which, in turn, will save you money. You can also lower your equated monthly instalments (EMIs) by choosing a longer repayment tenure with a new lender through car refinancing.

Car refinancing is a good idea when there has been a drop in interest rates since you took your original car loan, your financial condition has improved, you are unable to bear the burden of high EMIs, and if you feel you did not get a good deal on your car loan the first time around. However, refinancing on a car loan does not make sense when you have already made a substantial repayment of your original loan, your car value has depreciated, the prepayment penalties are high, and when you have plans to apply for new loans in the future as refinancing may impact your credit score negatively.

Things to keep in mind when availing a used car loan

In India, buying used cars are very popular. There are various finance options also available in case you wish to buy a pre-owned car. Most Non-Banking Financial Companies (NBFCs) and banks offer loans for pre-owned cars. However, various points must be considered before buying a used car on loan. It is important that you compare the interest rates offered by various banks and NBFCs before selecting one. The loan tenure must also be chosen wisely. Even though the EMI amount will reduce for longer tenures, the interest rates would increase. The rate of interest for used car loans range between 8.8% and 17%. It is vital that you check the processing fees that are being levied as well. Few NBFCs and banks charge a high processing fee.

Income Tax Benefits on Car Loans Taken to Purchase Electric Vehicles

If you have taken a car loan to purchase an electric vehicle (EV), you can now enjoy a tax rebate of Rs.1.5 lakh on the interest paid. This was announced in the latest Union Budget (2019-20) by Finance Minister Nirmala Sitharaman and is a part of the government’s efforts to stimulate the adoption of environment-friendly mobility solutions. If you have purchased an electric vehicle, you will be able to avail a benefit of about Rs.2.5 lakh during the entire term of the loan. The government has also slashed the tax rates on electric vehicles to 5% from the earlier 12%.

Car Loan Versus Car Lease

Financing and leasing are two methods through which people can get a new car. In both cases, the car owner/lessee would have to make monthly payments. The bank/leasing company would have a stake in the vehicle as well.

There are several differences between car leasing and car purchase through a loan. Listed below are some of the differences:

  • People who like to change cars every 3-4 years may find it more advantageous to lease a car as opposed to financing it. This way, the hassle of maintenance is also taken care of by the lessor.
  • When the lease period expires, the lessee can return the car to the leasing company. He/she does not have to go through the process of car valuation and sale, as would be the case if he/she owned the vehicle.
  • In the event of leasing a car, there is a restriction on the distance you can drive it for. This kind of restrictions are not there when you are the owner of a financed car.
  • Another disadvantage of leasing a car is the fact that you will be unable to customise the vehicle based on your personal preferences.

Check Latest Car Prices in India

With the automobile industry expanding at a rapid pace and with more and more car manufacturers establishing their bases in India, buying a car has become a hassle-free procedure. Car prices in India vary depending on the segment of the car purchased and with the additional features provided by the manufacturer. BankBazaar offers a comprehensive list of car prices across various models of cars sold in India. Be it a hatchback, sedan, luxury sedan, SUV or MUV, we equip you with the necessary pricing information to help you decide on the right car suited for your needs and current financial situation.

Financing and leasing are two methods through which people can get a new car. In both cases, the car owner/lessee would have to make monthly payments. The bank/leasing company would have a stake in the vehicle as well.

There are several differences between car leasing and car purchase through a loan. Listed below are some of the differences:

  • People who like to change cars every 3-4 years may find it more advantageous to lease a car as opposed to financing it. This way, the hassle of maintenance is also taken care of by the lessor.
  • When the lease period expires, the lessee can return the car to the leasing company. He/she does not have to go through the process of car valuation and sale, as would be the case if he/she owned the vehicle.
  • In the event of leasing a car, there is a restriction on the distance you can drive it for. This kind of restrictions are not there when you are the owner of a financed car.
  • Another disadvantage of leasing a car is the fact that you will be unable to customise the vehicle based on your personal preferences.

Check Top Car Dealers in India

Car dealerships in India are committed to providing quality services across all areas of car servicing and maintenance. Majority of car dealers in India have tie-ups with the automakers to impart training to their technicians in maintenance, diagnostics, system check, etc. Staff training and expanding the facilities is a continuous process taken up by dealers to ensure that customers receive the best value for the money they pay. Right from the sale of brand-new cars and used cars to periodic maintenance and customer support, the dealership outlets offer a wide variety of services. Nowadays, most dealers list out their services online to ensure a seamless customer experience without requiring face-to-face interactions.

FAQs about Car Loans

    1. Can I get 100% funding to buy a car?

The maximum amount of loan that you can avail to buy a car will vary from lender to lender. Most banks offer financing up to 90% of the on-road price of the car but there are some banks such as HDFC Bank, ICICI Bank, etc., that offers financing for up to 100% of the car’s on-road price.

2. Can I pre-pay the entire loan amount? What are the conditions involved?

Yes, you can prepay the entire car loan and save on vital interest payments in the future. However, most banks will allow the pre-payment option after you have chalked off 6 months on your loan tenure. Plus, you will be expected to pay a small fee as pre-payment penalty that will be dependent on the leftover loan amount. 

3.What car models are financed by the standard car loan in India?

Unless otherwise specified, almost all small to medium sized cars, Commercial Vehicle Loan, Sports Utility Vehicles (SUV) and Multi Utility Vehicles (MUV) come under the purview of car loans available in India. However, as mentioned, refer to the loan brochure for exceptions to this rule.

4.When applying for the car loan, do I need a guarantor/ security?

Almost all car loan products available in India are secured loans, with the procured vehicle itself acting as the customary security. Most lenders in India will not insist upon any guarantors; however, if your annual income does not match up to the expected requirement, then you may be expected to sign-up a co-applicant and/or guarantor.

5.What are the commonly available car loan repayment tenures?

Repayment tenures usually range from 12 months to 84 months (1-7 years)

6.What kind of a credit score do you need to buy a car?

Just like with most loans, a high credit score above 750 is ideal. But you can still apply for a loan if your credit score is above 600. Remember, if your score is too low, your application may be rejected.

7,Will my credit score affect the interest rate?

Yes. Some banks will offer lower interest rates to applicants with high credit scores. Likewise, borrowers with low credit scores will have to bear higher interest rates.

8.What is the minimum credit score I need to get a car loan?

When you apply for a car loan, lenders will look for a credit score of at least 750. Below this score, lenders may be reluctant to lend to you as it indicates your low repayment capacity. Some banks may offer you a car loan despite your low credit score but they may charge a higher interest rate

9.Should I take a car loan from the car dealership or bank?

Before you apply for any car loan, ensure that you explore all the options available. Once you explore, you will get an idea about the benefits offered by various lenders on their car loans. Compare the benefits offered and pick a lender that fits your requirements. Whether it is a bank or a car dealership, pick the one that offers better interest rates

10.Do banks offer finance for used cars?

Yes. Many top lenders such as SBI, HDFC Bank, ICICI Bank, etc., offer loans to buy used cars. These lenders offer car loans for up to 85% of the car’s value provided that the car is not more than 5 years old. Used car loans can be repaid in a maximum of 7 years

11.What will lenders look for when I apply for a car loan?

One of the most important factors that lenders consider before offering you a car loan is your credit score. As stated above, a credit score of above 750 can fetch you lower interest rates and other benefits. The other factors that lenders look for when you apply for a car loan are your employment status, residence and job stability, income, debt-to-income ratio, etc.

12.What is the lowest EMI that I need to pay for a car loan?

The amount of EMI (equated monthly instalments) that you will be paying towards your car loan will depend on the interest rate, loan amount, and the repayment tenure you choose. You can calculate the EMI by using the EMI Calculator tool available on the BankBazaar website. For example, let us suppose that you avail a car loan of Rs.1 lakh at an interest rate of 12% for a tenure of 5 years. Using the tool, we calculated the EMI and found it to be Rs.2,224

13.How much down payment do I need to make to buy a car?

Making a higher down payment will mean that you will need to avail a lower loan amount to buy a car. When you avail a lower loan amount, there are chances that banks or lenders may offer you a car loan at lower interest rates. This is simply because if the loan amount is lower, the repayment will be quicker. So, though there is no hard and fast rule to how much down payment you should make, a higher down payment will ensure that your debt liability is lesser.

14.Can I get a lower interest rate if I have a good credit score?

If your credit score is above 750, you can negotiate with the banks to offer you a car loan at a lower interest rate. Many lenders will let you negotiate on the interest rates since your high credit score is an indication of your high repayment capacity. Some lenders may also offer you a waiver on the processing fee if you have a good credit score.

topbankloan.com
Register New Account
Reset Password